2016-06-16

Intervention Reducing Long Term Growth in China

China is cranking up state spending on infrastructure to support economic growth as private-sector investment falters, raising concerns that reforms to the inefficient state sector are being kicked further down the road by the resulting build-up in debt.

Policy insiders say the slowdown in private investment is particularly worrying, since Beijing's extra spending was designed to shore up investor confidence and spur private spending, not to repeat the experience of 2008-09, when a 4 trillion yuan ($610 billion) stimulus package saddled the economy with a mountain of debt.

"We are relying on infrastructure investment to support growth, but we cannot rely too much on this. We need to motivate private investors," said an influential economist at a top government think-tank.